The rise of the health-conscious consumer

The health-conscious consumer tribe in China has experienced significant growth over the past decade. This expansion has been driven by rising incomes, increased access to health information, the impact of the Covid-19 pandemic, and government initiatives like Healthy China 2030. As a result, consumers across different age groups, from young professionals to the elderly, are increasingly focused on maintaining a healthy lifestyle – and are willing to invest in products and services that promote health, from robust vitamin regimes to exercise classes.

Key drivers

• Cultural shift: Rising incomes and the Covid-19 pandemic have contributed to a widespread cultural shift towards preventive healthcare, where maintaining health through diet, exercise, and lifestyle choices is prioritised. This trend has also been fuelled by the rising availability of health information online and through social media. In many ways, China’s health awareness boom aligns with that in Western markets.
• Product categories: Nutraceuticals, supplements, organic food, and fitness-related products are popular among this group of health-conscious Chinese consumers. Traditional Chinese Medicine (TCM) products also play a significant role, combining modern wellness trends with more established cultural practices. Chinese consumers also demonstrate a distinct preference for “consumables” in promoting health, creating an especially large opportunity for nutraceuticals and supplements.

Effective marketing strategies

• Content and livestreaming: To effectively engage with health-conscious consumers, brands should focus on delivering educational content that highlights product benefits, proper usage and real-life testimonials. Platforms like Douyin (China’s version of TikTok) are crucial for reaching this tribe, as they tend to prefer authentic, informative content. Livestreaming, in particular, has become a powerful tool for brands to explain product efficacy and function in real-time, providing the transparency that health-conscious consumers value.
• Influencers: Collaborating with health and wellness influencers is another effective strategy. These influencers are often seen as trusted sources of advice, and their endorsements can significantly enhance a brand’s credibility. By partnering with influencers who resonate with this audience, brands can extend their reach and build stronger connections with health-conscious consumers.

Learn more at China Consumer 2024

The health-conscious consumer is just one of several influential tribes shaping China’s consumer landscape. Each tribe offers unique insights into China’s evolving market dynamics and understanding these tribes is key to unlocking new opportunities for growth.

For a deeper dive into these consumer tribes, join the upcoming China Consumer 2024 conference on October 14th, where WPIC will be taking part in a panel session on “Navigating Subcultures and Tribes” and hosting a breakout session on “The Douyin Playbook: Growing in China through Social Commerce”. This event will offer invaluable insights into the latest trends, backed by expert analysis and real-world examples. Don’t miss out on this opportunity to stay ahead in China’s competitive market!

Click here to register

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The perception of terms like ‘organic’, ‘natural’ or ‘bio’ is different in China. People in the West are already used to natural ingredients and have a clear understanding of what is considered organic. Those products are also well defined and described, with organic certification always added to the label.

In general, Chinese consumers are more pragmatic in using the term ‘natural’ because the concept is wider; basically, whatever is naturally grown is perceived to be healthy and organic, without the need for special labels or government regulations.

Regardless of naming or certification, the desire for these products is growing as a part of a wider trend of better awareness of healthy diets and concerns about food safety. According to a report released by the State Administration for Market Regulation, in 2021, sales of organic products in China reached US$ 14.2 billion, an increase of 18.3% over 2020, ranking it fourth in the world.

Between 2018 and 2021, the number of people buying organic food at Hema Fresh (a brick-and-mortar grocery outlet owned by Internet giant Alibaba) quadrupled, with a penetration rate of nearly 30%. Many customers start by buying organic vegetables and gradually expand to various organic foods and products, among which female consumers with children are the main buying group.

Looking at the evolution of the market, organic food in China has huge potential in international and domestic markets.

Organic agriculture in China

China is one of the world’s largest agriculture producers and consumers of agricultural products. Agriculture is one of the country’s most important economic sectors, employing over 295 million farm workers.

China is the world’s biggest producer of rice and an important source of wheat, corn, tobacco, soybeans, peanuts, cotton, potatoes, sorghum, peanuts, tea, dairy, millet, barley, oilseed, pork and fish, which provide the country with a small portion of its foreign trade revenue.

More than 2.95 million hectares of land were farmed organically by the end of 2022 in China. Organic crops are usually cultivated naturally with manure or compost and treated only with natural pesticides and insecticides.

There are three main organic food production models in China. In the first, a big company leases land from a farmer and pays them. The second model is that under the permission of local governments, big companies sign an organic food production contract with farmers. The third one is organic producer associations. Farmers set up an association by themselves to conduct large-scale organic food production.

What kinds of organic food products are popular in China?

Organic formula and other baby food products are increasingly in demand. Several food scandals have had an impact on this change in buying habits, including melamine-contaminated milk in 2008, which sickened 300,000 children. Online retail platform JD – China’s second largest e-commerce platform behind Alibaba – reports that sales of organic infant food supplements grew 6.6% in 2019 and 11.2% in 2020.

For foreign brands, there is a real opportunity to import their products and establish themselves in China by meeting the specific expectations of this market, especially as they are seen as exemplary from a health point of view.

Similarly, the organic dairy industry in China has been growing steadily in recent years, driven by increasing demand for healthy and safe food products. The increasing demand for organic dairy products in China can be attributed to several factors, including rising awareness of the use of fertilisers, pesticides, and bovine growth hormones in conventional dairy farming practices, which has led consumers to opt for healthier options.

Organic dairy products are thought to have higher levels of beneficial nutrients such as vitamins, omega-3 fatty acids, antioxidants, and conjugated linoleic acid (CLA).

Dairy aside, organic fruits, vegetables, meat, poultry, and seafood have all experienced significant growth in recent years due to increasing demand for healthy and safe food. There is also a rising awareness of environmental sustainability and animal welfare concerns among consumers. Organic fruits and vegetables are particularly popular, accounting for over 70% of the market share.

In general, consumers are willing to pay a premium for organic products that are free from harmful pesticides, herbicides, and synthetic fertilisers. The Chinese government has been promoting the industry’s development by providing subsidies for organic farming and encouraging sustainable agriculture practices.

How are organic food products in China purchased and distributed?

China’s organic food industry is divided between supermarkets, independent small grocers, internet retailing, direct selling, and more. The market for organic food products in supermarkets has experienced significant growth in recent years, fuelled by health awareness, rising disposable incomes, and concerns about the environment.

Leading supermarkets in China, including  , have responded to the increasing demand for organic products by expanding their offerings.

Nevertheless, as the largest internet retailing market in the world, online-to-offline (O2O) models are often the most efficient sales channels for organic food in China. As the biggest consumer market for organic packaged foods and beverages, and the fastest-growing organic food market in Asia, China’s organic market offers many opportunities for foreign B2B investors.

There are several key market players in the industry, including China Mengniu Dairy Company Limited, Abbot China, Ausnutria Dairy (China) Company Ltd, TINGYI (Cayman Islands) Holding Corp, and WH Group Limited.

What other organic products are popular in China?

Physical health has risen to the top of Chinese consumers’ interests since the Covid-19 pandemic. Beyond food, this philosophy is also reflected in the consumption of other products, such as beverages and cosmetics.

The organic cosmetics market in China is still considered a niche, but Chinese buyers are slowly starting to show interest in using more organic and natural products. This shift is visible mostly in first-tier cities, among Gen Z and millennials.

The use of natural products in cosmetics requires organic brands to go through formulas and regulations to assure customers that the product is safe. However, in China, there is no central agency that issues an organic certification, as is common in other countries. For this reason, Chinese consumers trust foreign organic certified products more than local brands, as they are believed to be better.

As the green trend continues to grow in an expanding market, more companies will invest in green technologies for higher efficacy and better safety performance. Chinese beauty consumers from first-tier cities are more connected to global trends and want to follow them, resulting in a change in their shopping behaviours.

The adoption of sustainable packaging for cosmetic products by larger players has further bolstered the market growth. For example, Procter & Gamble recently announced a significant shift to plant-derived packaging for some of its leading China cosmetic brands and is using sugarcane-derived plastic from Brazilian company Braskem.

L’Oréal recently helped reduce the environmental impact of its packaging by introducing two new assessment tools, namely Sustainable Packaging Scorecard (SPS) and Packaging Impact Quick Evaluation Tool (PIQET), to its package design process.

Organic product certification and other legal issues

A major problem in China is the proliferation of brands that sell fake organic products. This trend has been responsible for a practice called “greenwashing”, which refers to a company that provides false or misleading information about their products being eco-friendly to gain market share.

The use of words such as ‘green’, ‘eco’ and ‘sustainable’ to describe products that are not environmentally-friendly are a form of greenwashing.

Foreign enterprises can register their green trademarks in China and market organic goods and services. Green marks used by companies give them a way of advertising and promising consumers to provide 100% organic and biodegradable products which are free from causing any harm to the environment.

A few countries, such as the European Union, the United States and China, accept the registration of green trademarks. But recently, in China, companies interested in registering green trademarks have been encountering difficulties and facing the rejection of their applications.

China’s Trademark Law prohibits the registration of deceptive trademarks. A brand that greenwashes its underlying products can be considered fraudulent. Analysts speculate that these rejections have something to do with China’s concerns over greenwashing.

In 2020, a national standard on organic products covering mandatory requirements for production, processing, labelling, and management came into effect in China, as well as the revised organic certification rules.

China’s Certification and Accreditation Administration (CNCA) released a catalogue of products eligible for organic certification. China classified this new standard and the accompanying new certification regulations as voluntary, and on this basis, did not notify either to the World Trade Organization (WTO).

However, if products are to be marketed in China as organic, compliance with this standard and accompanying regulations is mandatory.

The new organic standard includes changes to production and processing inputs, such as adding microbial preparations for control and prevention of animal diseases, adding detergents and disinfectants in plant production, adding requirements for packaging materials for feed products, adjusting lists of food additives, processing aids, and feed additives eligible for organic production and/or processing.

The new organic certification rules appear to have streamlined some certification practices. For example, an overseas organic production site that has acquired organic certification for at least four years (inclusive) can be waived from a 12-month organic conversion period before being certified to the Chinese organic standard.

If an organic product is produced or processed overseas, the product sample can be tested by a local testing agency. Under the new regulations, field inspections will take place on a limited number of farms if the organic production organisation consists of multiple farmers, instead of inspecting each individual farm.

Likewise, if the certified organic product is harvested multiple times a year, site inspections will be reduced to once a year. The 2019 organic certification catalogue has been modified to include all products in the supplementary catalogues released between 2012 and 2018. Notably, goji berries have been added to the new catalogue, but honey has not.

China has taken significant steps to try and increase the level of consumer trust in the organic industry. The CNCA mandates that all organic products have a 17-digit organic code, which consumers can input on the CNCA website to verify its authenticity. This has made traceability technology a crucial element of the Chinese organic industry.

Only 220 foreign brands, as of the end of 2022, were certified as organic in China, compared to more than 14,000 local products.

Conclusion

Since there are no clear regulations or one organic certification that can be seen as a guideline to what is or isn’t organic in China, it is essential for natural brands to educate their potential customers about the benefits of their products. Foreign companies cannot just assume that consumers are familiar with the terms already used in the West.

Most Chinese consumers are price-sensitive and look for value when buying organic products. China’s demand for organic food has grown at a fast pace in the past decade and it is expected that both production and demand will continue to grow.

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Jessie Zhang is the founder of Star Gourmet Communications, an integrated marketing and communications agency that works with some of China’s best-known hospitality and lifestyle brands, including DaDong China World Mall, San Pellegrino and Opera Bombana.

What are the main trends in the hospitality industry in China at the moment? How do you see these trends evolving over the next five years?

The restaurant and hotel industries in mainland China have changed a lot since the pandemic.

For example, fancy restaurants and large-scale business hotels are no longer the first choice for consumers; instead, they are more inclined towards niche boutique hotels or “internet famous” (wanghong) B&Bs. Many travellers will plan trips around “checking in” (daka – to tick off a popular spot) at specific hotels or restaurants, such as the Songtsam Boutique Hotels in Yunnan and Tibet or Bright Qi Hotels & Resort in Zibo, Shandong, which is set into the side of an 800m cliff.

A stay in one of these hotels can set you back as much as RMB 5,000 (£573) per night, and they can be booked up months in advance. The popularity of these independent hotels has forced international chains like IHG and Marriott to launch their own boutique brands to cater to the changing market.

What trends have fallen out of fashion and why?

As I noted above, high-end business travel is losing its popularity. One reason for this is that the pandemic has had a major impact on business budgets, and companies of all sizes are looking to make cuts to their travel and entertaining expenses. The other reason is that young consumers are much more discerning in their choices and actively seek out unique, diverse experiences.

Jessie Zhang, founder of Star Gourmet Communications

Hospitality was one of the industries most affected by the pandemic. How have venues responded to this challenge?

Hotels and restaurants were proactive in finding ways to protect their businesses during the pandemic. For example, Michelin-starred restaurants started to offer delivery menus – something unprecedented for restaurants of that calibre – and pre-cooked and “semi-finished products” (such as those akin to the recipe boxes with pre-portioned ingredients offered by services like Hello Fresh in the UK).

As you mentioned, China’s food delivery industry expanded massively during the pandemic, and this is likely to continue even now that Covid restrictions have been dropped. How are restaurants – especially fine dining restaurants – ensuring that their delivery/takeaway options maintain a high standard?

The convenience of food delivery has fundamentally changed the way people approach dining in China, especially in first-tier cities like Beijing and Shanghai, and that is unlikely to change even now the pandemic is over. In fact, the pandemic significantly improved the level of delivery offerings because it forced restaurants to adapt quickly and try new things. Nowadays, many restaurants have a specific team focusing on creating delivery offerings or a central kitchen making dishes to push out on delivery apps.

Many Western chefs working in China are increasingly using local Chinese ingredients on their menus. What has brought about this change? Are there any producers or ingredients that you are particularly excited about right now?

I think this move is in line with trends around the world. In the past, a chef like Umberto Bombana (a three Michelin-starred Italian chef who has restaurants in Hong Kong, Macau, Beijing and Shanghai) would have sourced everything from Italy, even down to the smallest tomato; now, his restaurant in Beijing, Opera Bombana, has its own organic farm in the suburbs.

On the one hand, sourcing ingredients locally obviously reduces ingredient costs. On the other hand, the pandemic made it much more difficult to source some imported ingredients, especially those where freshness is paramount, so chefs had no choice but to go local. Local ingredients also have the advantage of creating storytelling opportunities. For example, Marino D’Antonio, executive chef of Giada Garden Italian restaurant, sources pork for his roast suckling pig from a village in Chengde, a few hours’ drive from Beijing. He can directly communicate with the farmers and ask them to slaughter the pigs according to his requirements while also demonstrating his commitment to “rural revitalisation”, which has been a priority for the Chinese government in recent years.

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China is facing problems, such as an ageing society, social stress, environmental problems – including air and water pollution – and the end of the Zero-Covid policy. To prevent and shield themselves from the consequences of these problems, Chinese people of all generations are turning to health supplements.

The health supplement market has only started to grow in recent years, making it one of the sectors with the greatest potential for domestic and foreign brands. According to a report issued by the consulting firm Roland Berger, China may soon overtake the United States as the most significant nutritional supplement market in the world. The market is expected to reach US$ 40 billion by 2023, growing at a CAGR of 14%.

Consumers in China tend to trust traditional Chinese medicines and prefer natural dietary supplements. However, they are becoming more interested in Western health supplements and are educating themselves on the subject. There are many different products available on the market in this category, ranging from Chinese traditional medicine and vitamins to minerals, herbal products and functional foods.

What are the most popular supplement categories in China?

Since the Covid-19 pandemic, and especially in the post-pandemic era, Chinese consumers have shown increased health awareness, which has fuelled the consumption of consumer healthcare products such as vitamins and food supplements, with a preference for imported brands.

According to a survey done by Statista in 2020, most of the people (77%) that consume dietary supplements do it to strengthen and improve their immune systems. This is especially important in the post-pandemic era, as people are more aware of the risk of getting sick from Covid or another virus. 

Older adults are the demographic known to be most at risk of developing serious health complications from Covid-19. This is creating an opportunity for supplements that address the health needs of older adults, including ensuring that micronutrient needs are met for optimal health and immune support.

Figures from e-commerce platforms in China show that older customers are interested in multi-vitamins, calcium, iron and zinc. Meanwhile, nutrients such as coenzyme Q10, which plays an antioxidant role in the cardiovascular system, are in-demand for “precise nutrition” among the middle-aged and elderly.

Weight loss supplements are also catching up with immunity-focused supplements in China. New vitamin and supplement products with slimming claims rose from 3.9% in 2020 to 10.3% in 2021, while those making immune system claims dropped from 9.2% to 2.2%. This shift was pushed by a higher incidence of obesity among Chinese people, especially after several long Covid lockdowns.

Another significant reason for ingesting health supplements is to cope with stress and improve sleep. Many young people in China stay at work late, six days a week, and they are notoriously stressed, which causes problems such as insomnia. Integrated nutrition, melatonin and anti-fatigue products that reduce stress, boost energy, and improve sleep quality are the products that these customers are most interested in.

Improving skin, hair and nails is another major reason for taking food supplements, with beauty enthusiasts paying more attention to the “beauty from within” concept. Nearly 70% of beauty enthusiasts are female, and they are concerned about issues such as weight control, skincare and preventing hair loss. The Chinese Women Consumption Report 2022, released by JD.com in March 2023, showed that purchases by female users of astaxanthin and collagen, which benefit the skin and have antioxidant properties, grew by 63% and 49% year-on-year in 2022, respectively.

Finally, even pet owners can be a target for nutritional supplements. Affluent pet owners in first and second-tier cities are more than willing to invest in their furry family member’s health. Cat owners prefer vitamin supplements and intestinal health for their pets, while dog owners prefer bone and joint health and oral health. Adding a supplement has become the new refined feeding trend, and it is driving growth in the online pet health and nutrition market too.

An advert for 618 deals on British nutraceutical company Vitabiotics’ Tmall Global store

What formats of supplements are popular in China and where do people buy them?

A 2021 change in China’s supplement regulations led to rapid growth in alternative supplement formats. While tablets remain the top format, new formats have replaced capsules and powders, formerly the second and third most common in new product launches.

Chews and gummies jumped from 2.6% of the supplement market in 2020 to 17.6% in 2021. The “other” category, which includes cake, seed, jelly and candy formats, rose from 2.6% to 12.5%. More enjoyable formats like these can help fight pill fatigue and increase compliance.

Due to the increasingly fast pace of life, young people pursuing optimal nutrition and health prefer convenient products. Packaging convenience has been improved to support the daily habit of taking nutritional supplements, and convenient and small bags have become hot search keywords. Easy-to-carry products resolve customers’ pain points in diverse scenarios, including going to the office, on vacation, on business trips and at the gym.

On JD.com, sales of portable sports protein powder and spoon honey surged by 68% and 1,095% year-on-year, respectively. Sales of mini tablets are growing the fastest, and sales of oral liquids are doubling.

Consumers are also less likely to forget to take the product, be confused about how much to take each time, or suffer the burden of carrying the entire bottle or box of supplements.

One of the most important trends reshaping China’s supplement market is e-commerce. The three major companies that gained market share between 2019 and 2020 – By-Health, H&H and Dong-E-E-Jiao – all shared an expansion in e-commerce that allowed consumers to purchase their products even during lockdowns.

According to NutraIngredient- Asia, food supplements also have a record high in sales in terms of GMV (Gross Merchandise Volume) among all imported goods on Tmall. Although experts say that Tmall’s Singles’ Day has reached its peak in terms of sales, health supplements performed very well in the most recent Singles’ Day sales. In November 2022, the total health supplements products sales grew to RMB 4.78 billion from RMB 4.52 billion in 2021, with the average transaction price rising to RMB 340 from RMB 308.

What do British companies need to know before entering the nutrition and supplements market in China?

Although there are many interesting opportunities for foreign brands in the health supplement market in China, there are several aspects to consider and know before entering the segment.

In China, the regulation of nutrition and dietary supplements is governed by the State Administration for Market Regulation (SAMR) and the National Health Commission (NHC). All supplements sold in China must be tested and approved by the State Food and Drug Administration (SFDA). The government also continues to strengthen and update its regulations to ensure that the dietary supplement market is regulated and operates effectively.

The nutritional supplement market is classified by ingredients and end-users. Ingredients are further sub-classified into vitamins, proteins, amino acids, enzymes and botanical supplements. End-users are classified into infants and adults. 

Due to the relatively recent growth history of the healthcare product industry, consumers have limited brand awareness, and the choice of channels for healthcare companies has become the core of corporate competition.

Chinese customers are very tech-oriented and tend to do extensive product research online. This is why it is important to focus on branding and your online reputation to gain consumers’ trust.

The first step is to develop a Chinese website hosted in China, where consumers can read about the company and its brands, access information about all the brands, and find links to social media accounts. Having a website also requires good Baidu SEO to increase visibility in this popular search engine.

Baidu works like Google. E-reputation is important in China, and Baidu can help you get it. In general, Chinese consumers don’t trust unknown brands and prefer products with a good reputation that are perceived as premium and reliable. This makes e-commerce and community word-of-mouth recommendations essential for nutrition supplement sales. You can participate in online forums like Zhihu or Baidu Tieba to make your name known and to start conversations around your brand. This will also increase your SEO score.

Similarly, social media can help you gain the trust of your audience in China. For example, social media is responsible for popularising nutraceuticals among younger people. Not long ago, nutraceuticals were the choice of middle-aged and elderly people. However, they have gained significant popularity thanks to the conversations among younger consumers on social media.

Different social media platforms can serve different purposes. WeChat is an all-in-one platform where you can send newsletters, sell through private traffic or own your store within the platform. Weibo will help you reach people of all age groups, while Xiaohongshu and Douyin will help you address young Chinese women and men looking for vitamin supplements recommended by their favourite KOLs and live-streaming videos.

For example, Chinese company By-Health created the “By-Health Nutrition Academy” official account on WeChat and invited more than 200 nutritionists and more than 100 experts in medicine and nutrition to share knowledge and reply to followers’ questions about health. This increased brand awareness and promoted the reliability of its products among Chinese target markets.

By-Health has also been active in engaging its audience through community management. The company offers money to its followers in the form of a weekend bonus, and as a result, it has attracted the attention of additional users that now follow the brand and know its products.

In conclusion, the demand for nutraceutical products is growing rapidly in China, causing changes in the industry. Consumers are becoming more mature, and traditional distribution channels are changing, creating new opportunities for British brands.

The post Practical Guide to China’s Nutrition and Supplements Market appeared first on Focus - China Britain Business Council.

Western fast food was introduced into China in the 1980s when KFC opened its first outlet in Beijing. Since then, the sector has experienced substantial growth, with other international brands, such as McDonald’s, Subway, Domino’s Pizza, and Pizza Hut joining the market.

As of April 13, 2023, KFC has maintained 9,650 outlets in China. Meanwhile, McDonald’s has 5,746 outlets, Subway 718 outlets, Domino’s Pizza 613 outlets, Burger King 1,494, and Taco Bell over 50.

In the early 2000s, domestic fast-food chains began to emerge, offering Chinese-style fast food with a modern twist. For instance, brands such as Dicos and Yonghe King offered Chinese-style breakfast options, while Ajisen Ramen introduced Japanese-style ramen noodles to the Chinese market.

China’s fast food market is now among the largest in the world, demonstrating a continuing upward growth trajectory. In 2023, the market size of China’s fast-food industry is estimated to reach RMB 3,687.8 billion (US$536.33 billion).

What kind of fast foods do Chinese consumers like?

In 2021, hamburgers ranked third in popularity among the top 10 categories of online food and beverage orders, just behind milk tea and rice combo meals. Notably, Chinese hamburger brands that cater to lower-tier cities and offer lower per capita prices are also experiencing rapid growth, with brands like Dicos, Pailahamburg and Tasting Burger already boasting thousands of stores.

Furthermore, the boundaries between various culinary genres, such as main meals, fast food, Chinese cuisine and Western cuisine are gradually blurring, leading the catering industry to adopt a new era of integration. For example, Chinese brand Xi Bei has launched a new fast food sub-brand called Jia Guolong Wine-Air Buns, which offers a unique spin on traditional Chinese-style hamburgers using speciality buns from Tonglu, Zhejiang Province. Xi Bei, traditionally known for its main meal offerings, has been making inroads into the fast-food market in recent years. By introducing the easily standardisable roujiamo (a Chinese hamburger-style street snack from Shaanxi Province) as a breakthrough point, they are poised for rapid replication and expansion in the fast-food market.

According to recent data from iiMedia Research, more than half of Chinese consumers dine at Western-style fast food restaurants, while 40.4% of respondents prefer a blend of Chinese and Western-style fast food. Therefore, as Western-style fast food becomes increasingly popular and consumer preferences become more varied, restaurants that offer a fusion of Chinese and Western-style fast food are more likely to appeal to customers in China.

Trends driving changes in China’s fast-food market

Emphasis on healthier options and sustainability

The fast food industry in China is placing more emphasis on providing healthier options to consumers. Many fast food chains are offering more vegetarian and vegan options, as well as reducing sodium and sugar in their menu items. In addition, some chains are incorporating organic and locally sourced ingredients into their menus to appeal to health-conscious consumers.

Furthermore, sustainability is also becoming a key consideration for fast food chains in China. Many are implementing eco-friendly practices, such as reducing packaging waste, using renewable energy sources and promoting recycling. This not only appeals to environmentally conscious consumers but also helps fast food chains to reduce costs and improve their overall brand image.

Advances in technology

The fast food industry in China is rapidly evolving with advancements in technology. Many chains are adopting digital ordering systems, self-service kiosks and mobile payment options to improve efficiency and enhance the overall customer experience. Moreover, some chains are experimenting with automation and artificial intelligence (AI) to streamline operations and reduce costs. For example, some restaurants have implemented robots to prepare and serve food, while others are using AI to analyse customer data and personalise menus based on individual preferences.

These technological advancements enhance efficiency and provide valuable data insights for fast food chains. By collecting and analysing data from digital ordering systems and customer interactions, chains can better understand consumer preferences and make data-driven decisions to improve their overall operations and customer experience.

Growth of delivery and online ordering

The rise of delivery and online ordering platforms has hugely impacted China’s fast-food landscape. Many consumers now prefer to order food online and have it delivered to their door rather than dining in fast-food restaurants. This has led to a surge in delivery and online ordering services, with many fast food chains partnering with these platforms to reach more customers. Moreover, some chains are even developing their own delivery platforms to compete with third-party services.

As the market for delivery and online ordering continues to grow, fast food chains in China are adjusting their strategies to capitalise on this trend. Many are investing in digital marketing campaigns and optimising their menus for online ordering, while others are improving their delivery logistics to ensure timely and accurate delivery of food. These efforts are crucial in maintaining a competitive edge in a market that is rapidly shifting towards online and delivery channels.

Lessons for foreign investors

Location is notorious for playing a key role in guaranteeing the success of Western fast food brands in China, as they have excelled in securing prime locations in China’s top-tier cities, particularly near major sights. For example, KFC’s first restaurant was located on the edge of Tiananmen Square in Beijing. Acquiring real estate in heavily trafficked areas has been a crucial strategy for these companies. When fast food restaurants are located next to tourist sites in China, they can attract both foreign and domestic customers. Expanding into the inland regions of China, especially tier-3 and tier-4 cities with a growing middle class, is also a profitable venture.

On the other hand, experience has shown that adapting to local tastes is vital to the success of foreign brands in China. KFC is the best example of a fast food specialist that understood how to capture Chinese tastes while maintaining its American brand identity. Fast food restaurants in China offer pork chops, curry, and Chinese staples like congee and youtiao (a fried donut). In this respect, KFC demonstrates exceptional cross-cultural adaptation in China.

This post was originally published by Dezan Shira’s China Briefing as ‘The Recipe to Win China’s Fast Food Market’

The post How KFC and McDonald’s conquered the Chinese market appeared first on Focus - China Britain Business Council.

As we near 2023’s half-way point, retail sales in China have seen marked improvements during the first few months following the complete removal of Covid-19 regulations. In the first quarter of the year, retail sales rose steadily at 5.8%, and in March, there was a notable uptick, with a 10.6% increase in retail sales compared to last year. This represented the highest growth rate since June 2021.

Read on to find out the top five trends that brands should watch out for in the second half of 2023.

E-commerce continues to rise

As the world’s largest e-commerce market, China had over 1 billion consumers shop through e-commerce channels in 2022, making up 45.3% of all online retail sales worldwide. Within China, online sales channels accounted for 51% of all sales in the country.

E-commerce growth has continued throughout the Covid-19 pandemic, and this trend is unlikely to stop even with Covid-19 restrictions now removed. This is especially true as the purchasing power of Gen Z consumers, who grew up with technology and are the most digitally savvy generation, continues to increase.

Brands who want to succeed in China must consider online sales channels in their market entry or expansion plans and reach customers where they are shopping for products.

Source: Statista – in cooperation with MOFCOM China, February 2023

The metaverse: China edition

Over the past year, the metaverse has become increasingly substantial in China, with more brands testing the waters and expanding into this segment. The metaverse can be explained as a virtual world that allows for greater integration of the digital and physical, in areas ranging from socialisation and shopping to work. Technologies include those within the fields of virtual and augmented reality.

The metaverse presents uncountable new opportunities for brands, businesses and developers, as shown by the over 16,000 metaverse-related trademark applications from Chinese companies. Many of the big tech companies in China, including Alibaba, Baidu, Tencent and ByteDance, have released their own metaverse ecosystems, wherein users can create avatars and interact in a virtual environment. In fact, since the second half of 2021, over 37 digital collections have been released by brands on Alibaba’s Tmall Luxury Pavilion, purchased by thousands of customers.

Compared to countries such as the US and the UK, Chinese consumers are showing greater interest in the metaverse, especially as it relates to gaming. In fact, among Chinese consumers who are interested in the metaverse, over 82% are optimistic about its future benefits, which is much more than among those in Western countries.

Virtual influencers: The new celebrities

AI-generated virtual influencers are amassing huge numbers of followers and becoming celebrities in China, with the industry expected to increase from $870 million in 2021 to $6.7 billion in 2025. This comes at a time when China is cracking down on human celebrities and influencers, with virtual influencers becoming safer, scandal free alternatives.

Technological advances have allowed these virtual influencers to hold live streams, walk down virtual runways and pose alongside products, just as a real influencer can. Especially among fashion brands, working with virtual influencers in China has become increasingly common.

Although the fanbase for human influencers is much larger than the growing fanbase of virtual influencers for now, they are certainly a trend to keep an eye on.

Our furry companions

Over the past ten years, the pet industry in China has seen a 2,000% growth rate. Chinese pet owners are increasingly treating their furry companions as beloved family members or children, and are more willing to spend on them. The younger generations in China are moving away from the traditional family unit, with many preferring to live alone and looking to pets to fulfil their emotional needs.

As a result, all categories within the pet market are seeing surges, from pet food and pet toys to pet tech devices and clothing. The entire pet industry is expected to reach US$113.9 billion in 2025. With over 76% of pet owners in China under the age of 30, online purchase channels are at the forefront of the pet market.

Healthy, premium and natural pet foods and treats are hugely popular among pet owners, who are mostly young, highly educated consumers living in higher-tier cities. These consumers are not only interested in their own health but also the health of their animal companions.

Other trends include pet tech devices such as automated feeders, smart cameras, or smart litter boxes, many of which can connect to WiFi and be controlled by apps on mobile devices.

Adventure and the outdoors

Another trend that has surged over the past year is a fascination with the outdoors. From skiing to camping, Chinese consumers are more willing than ever to try out new hobbies and activities, especially after the end of Covid-19 restrictions.

The Winter Olympics in Beijing helped to drive interest in winter sports, leading to a growth in sales of winter sports equipment among Chinese consumers. Moreover, the popularity of Team China’s Eileen Gu, who won the gold medal in the Freeski Big Air event among others during the Winter Olympics, has also added to the excitement and hype around winter sports. Many of these new enthusiasts are first-time skiers and require an entirely new set of clothes and gear, making China a budding and still not fully tapped market for brands within this category.

Aside from winter sports, Chinese consumers are also showing greater interest in hiking and camping as summertime activities, which is a market that is expected to increase to above $100 billion by 2025.

As we continue into 2023, brands need to be aware of the changes happening and the shift toward a digital lifestyle. More than ever, Chinese consumers are living a significant portion of their lives online, even as they continue to expand their interests offline. Brands who want to engage and connect with potential customers in China must understand their positioning in the market and have a grasp on both Chinese consumer offline behaviour and how to reach them online.

This article was first published in The RED Edition Issue 8 by RedFern Digital

The post The China trends to know about in 2023 appeared first on Focus - China Britain Business Council.

Tell us more about how Diageo entered the China market.

We established our China business in 2002 and over the years, we have developed an outstanding portfolio of international and local premium beverage alcohol brands in China, ranging from Scotch whisky, gin, vodka, liqueur, rum, and beer to Chinese baijiu. Today, China is one of Diageo’s top three global strategic markets.

What major successes and growth has Diageo experienced in that time?

Over the last few years, Greater China has increased from 2% to 5% of Diageo’s global net sales.  In the first half of the 2023 fiscal year, Greater China net sales grew 2%, driven by Scotch with strong performance in the super-premium-plus segment.

We are rapidly expanding our strategic footprint in China and have made a series of investments to better serve the growing market. For example, in May 2021, we established a regional Logistics Hub in Shenzhen to service China and the Asia-Pacific region, and the Diageo Eryuan Malt Whisky Distillery in Yunnan Province is under construction and due to open next year. The distillery will be carbon neutral in operations and will produce the highest quality Chinese single-origin whisky.

Speaking of carbon neutrality, our 10-year sustainability action plan, “Society 2030: Spirit of Progress”, which focuses on promoting positive drinking, championing inclusion and diversity, and pioneering grain-to-glass sustainability, underpins our sustainable business strategy.

What challenges have you faced?

In terms of challenges, the restrictions of the Covid pandemic impacted our business, both in terms of employee welfare and sales and distribution of our products. Nevertheless, we responded with speed, agility and a strong sense of community. We always put our people first. During the extended lockdown in Shanghai, we delivered multiple food care packages to employees and their extended families and friends and provided counselling and support services. This commitment has helped strengthen our brand and competitive advantage to further attract talent critical to our future growth.

The Chinese economy has proven remarkably resilient, and we expect that the easing of Covid control and entry policies will bolster the economy, boost domestic consumption and enhance foreign exchange and cooperation. Nevertheless, China’s market is complex and rapidly evolving, with multiple consumer segments and sophisticated demands. It has taken patience, agility and hard graft to build categories, educate consumers, enhance brand awareness and expand our route to market. We have learnt a great deal in our over 20 years in China, and we will continue to grow our business and continuously fine-tune our strategy to meet market requirements.

Atul Chhaparwal, Managing Director, Diageo Greater China,

How critical is the China market to Diageo’s global strategy?

China is the world’s largest beverage alcohol market, with 25% of global total beverage alcohol (TBA) value and one of the fastest-growing TBA markets in the world. The share of international spirits still remains low (RSV accounts for 2.5% of TBA market), but this reflects the huge growth potential.

Whisky – our core strength – is the second-largest international spirits category in China but also among the fastest-growing beverage alcohol categories. We posted double-digit growth in Scotch in our 2022 financial year despite the impact of Covid restrictions. Our whisky retail sales value is ranked no.1 in China market, according to statistics from IWSR 2022 [a market analysis company].

We are confident about double-digit accretive growth in China for our international spirits business.  We can expect that China will continue to open up and pursue high-quality development and that consumers will continue to seek higher levels of quality consumption, further boosting an already vibrant consumer market and continuing the trend of premiumisation.

Tell us a little bit about how Diageo connects with consumers in China. How does the Chinese market differ from other major markets you operate in?

China is one of the world’s most exciting markets for spirits producers. The potential has always been clear, but it has been fantastic to see how consumers in China are increasingly embracing international-style spirits – particularly Scotch whisky, which is proving especially popular with younger consumers.

As one of the world’s leading international beverage alcohol companies, we have witnessed the booming development of international spirits in China and the trend of premiumisation. We are excited by the potential of the market and will be continuously developing innovative products that both cater to China consumers’ diversified demands and pay tribute to local Chinese culture.

At the same time, baijiu plays an important role in China’s unique alcohol culture. Diageo is currently the only international beverage alcohol company to participate in the dynamic baijiu sector, and we are very proud of our involvement with the iconic Shuijingfang brand.

Chinese consumers are also among the most sophisticated digital consumers in the world. We are actively embracing new consumption trends and continue to invest in digital and e-commerce channels and work with local partners to integrate online and offline strategies that jointly contribute to the development of the industry in China.

Overhead view of the design of Diageo Eryuan Malt Whisky Distillery

What are your thoughts and reflections on the Chinese consumer landscape today, and how has this changed over the pandemic?

The TBA market continues to grow across all categories in China. While international spirits is the fastest-growing category, it still only represents around 2.5% of the total market, presenting a clear opportunity for Diageo.

At the height of the pandemic, the extended closure of our on-trade channels, such as restaurants and bars, due to lockdowns significantly impacted our business. On the other hand, we saw an increase in in-home consumption that led to growth in our e-commerce channels. In fact, Greater China achieved a 2% growth in net sales value in the first half of the 2023 fiscal year.

In 2020, as part of our global initiative to support and sustain the hospitality industry, we launched the “Raising the Bar” initiative in support of more than 1,000 bars and restaurants in six cities across China.

We remain optimistic about the China market and the growth potential for our business and expect the market to rebound strongly as consumer confidence gradually returns.

What do you think will be the hottest consumer trends in China over the next five years?

As China has set itself highly ambitious targets on sustainable development goals, I have noticed a growing awareness of sustainability and social responsibility among consumers, especially in terms of responsible drinking and environmental protection. There are emerging wellness trends towards lower alcohol and lower calorie drinks offerings, and consumers are becoming more discerning and choosing brands with strong environmental sustainability credentials.

We have an opportunity to work with Chinese industry and government to address many of these challenges and position ourselves as thought leaders in this area. Our Society 2030: Spirit of Progress initiative is setting the standard for ESG and is opening doors at multiple levels for us to engage with key stakeholders in China.

Diageo’s Positive Drinking Month initiative

Today, we are building on a successful track record of ESG progress. For example, we have localised our flagship responsible drinking programme, DRINKiQ, to educate Chinese consumers on the effects of alcohol and inform them of the choices they make when drinking.

Our integrated ESG strategy is anchored around our business and its positive impact on our people, our communities and broader society. Importantly all our initiatives are aligned with China’s own sustainable development goals.

What are Diageo’s future ambitions and plans in China?

We will continue to increase our strategic footprint through a series of “in China for China” initiatives.  For example, our Diageo Eryuan Malt Whisky Distillery is scheduled to open next year and will bring China into the centre of the global whisky conversation.

Meanwhile, we will continue to expand our local innovation and production capabilities and develop innovative products that satisfy Chinese consumers’ diversified demands.

We are committed to ensuring that our sustainability and ESG strategy aligns with China’s own high-quality development goals, be they industrial, social or environmental, and we look forward to continuing to work with local partners, industry peers and organisations such as the China Alcoholic Drinks Association (CADA) to support China in its goals to improve quality of life, facilitate sustainable development and optimise the business environment.

Our “Society 2030: Spirit of Progress” sustainability action plan will continue to guide us to create a more inclusive and sustainable world.

If you could give one piece of advice to UK consumer brands entering China, what would it be?

Stay at the forefront of Chinese consumer insights and trends to ensure your brands and products remain relevant in this rapidly evolving market.

China Consumer 2023

This article was produced as part of a series for China Consumer 2023.

Learn more about CBBC’s flagship consumer event of 2023 here.

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Projections suggest that revenue in the Chinese food market will amount to US$1,386 billion in 2023. The market is expected to grow annually by 9.34% (CAGR 2023-2027), and, most notably, approximately 34.6% of total revenue will be generated through online sales by the end of the year.

Consumers are choosing healthier, more premium brands

The trend of consumption “upgrading” in China is not a new one, with consumers in higher-tier cities already used to buying premium and luxury products. However, today, more Chinese people in lower-tier cities are choosing more branded products, and while the pandemic dampened spending to some extent, the trend is still present and increasing. 

The F&B industry is experiencing a similar pattern. Affluent and informed Chinese consumers have begun to prioritise better health and a better quality of life. As a result, products aligned with healthier lifestyles have seen increased demand.

This is evident across the beverage industry. Packaged drinking water is the biggest beverage segment in China’s soft beverage market. While purified drinking water has a majority share of this segment, natural water and mineral water have increased rapidly in recent years because of growing health consciousness. Likewise, reduced or no-sugar teas, cleansing juices and nutritional drinks have all experienced higher demand.

A recent survey revealed that 86% of consumers from tier 1 and 2 cities considered food safety before buying produce. Fresh food, including vegetables, eggs, meat and fruits, is a high-demand category as it is considered natural and chemical-free. In line with this, healthy packaged food such as salads is another area that is seeing growth.

Besides health and safety, Chinese consumers are showing a preference for premium brands. Relating to alcoholic beverages, consumers are now placing more value on experience and enjoyment and hence are prepared to pay more for products that fulfil this need. 

Companies that offer a variety of premium products that focus on the idea of being “authentic, natural, healthy and high quality” will enjoy a significant advantage in the Chinese F&B industry. 

Food shopping moves online 

Like consumption upgrading, online shopping is not a new development. Mandatory Covid lockdowns accelerated the pace of adoption among consumers, and e-commerce is now a vital part of consumer shopping behaviour in China, with 34.6% of total revenue generated through online sales.

The e-grocery (fresh produce and fast-moving consumer goods) rate, however, has lagged at 10% penetration, and this is likely due to the short shelf-life of fresh food, which puts demand on logistics, as well as offline channels such as convenience stores that cater to on-demand items. Improved infrastructure and distribution channels, as well as brands shifting online, are expected to accelerate e-grocery penetration rates to 33% by 2025.

Digitally savvy younger consumers enjoy the convenience of buying groceries online. And it is not just consumers in tier 1 and 2 cities that are doing so; shoppers in tier 3-5 cities are also embracing this trend and are expected to contribute to more than half of the increment in the e-grocery market size between 2019-2025.

Another area hit hard by Covid lockdowns was the food service sector. However, China has the fastest-growing food service market in Asia, estimated to reach US$ 914.09 billion by 2027. China’s per capita income has been growing year on year, so eating out is becoming the norm. The market demand for food services is increasing since its citizens are looking for a more convenient life, which implies that the future will also have a broader foodservice market.

During the health and economic crisis created by Covid, the purchase of local products also became significant for Chinese consumers. Despite the financial difficulties many families face, the quality of food products remained top of mind. During lockdowns, home delivery had seen tremendous growth; however, as dine-out reopened, the situation returned to balance.

Innovative products in demand

With competition in the F&B industry in China increasing rapidly, companies are looking to innovation to attract consumers. New products, new packaging, new channels and new ways of marketing are also part of the latest market strategies. 

In the beverage segment, companies are continuously creating new products to cater to younger consumers. Likewise, China’s local condiment producers have launched customised, functional products to meet the demands of different consumers. For example, in the soy sauce category, there are customised sauces for clay pot dishes, Hainanese chicken rice and steamed fish. The retail prices of these sauces may be more than double those of ordinary products. 

Technology is also playing a huge role in helping innovation; for example, the popularity of live streaming has helped many new product launches attract the attention of younger consumers. Online live broadcasting and direct-to-customer (DTC) online sales channels have become popular and efficient ways to reach consumers for brand building, marketing and sales, especially for emerging brands. 

What F&B categories are seeing the most growth?

In terms of F&B categories, analysts believe that premium alcoholic drinks, yoghurt and fresh dairy, innovative compound condiments, packaged drinks and health supplements will experience above-average growth rates. 

Experts admit that the current Covid situation in China makes consumer trends unpredictable at the moment, despite China’s official data showing low infection figures and few deaths. Observers believe the lifting of the strict controls on movement could, in fact, boost the economy, regardless of the resulting increase in infections. 

Chim Lee, a China/Asia analyst for the UK-based Economist Intelligence Unit (EIU), predicts that the end of China’s Zero-Covid policy will have a mixed but ultimately net-positive impact on packaged food sales. Lee notes that, relative to other retail categories, food sales were a bright spot in 2022, as the packaged food industry benefited from people stockpiling food in anticipation of lockdowns and other restrictions on mobility. 

Research group GlobalData noted that the overall value sales of packaged food in China crossed the US$1 trillion milestone in 2022, with an increase projected in 2023. GlobalData says meat, dairy, soy, bakery and cereals are set to be the largest categories in 2023, contributing well over half of the overall packaged food sales in China by value.

Citing a recent survey conducted among several securities brokerages, analysts from Stockstar found that a total of 30 food stocks traded on Chinese bourses achieved growth in net profits in 2022. It singled out Guangxi-based Yanjin Shop Food, which mainly manufactures and sells snack foods containing nuts, tropical fruits and marine products, for its year-on-year profit growth (up 102.3%). 

The service also highlighted three other companies: Sichuan-based Teway Food Group, which manufactures hot pot ingredients (for the home-based cooking of tabletop hot pot recipes), seasonings and condiments; Shandong-based Delisi Food, which processes and sells meat products; and Shanghai-based dairy-maker Milkground (each exceeding 70% year-on-year profit growth).

Even as China pursued its Zero-Covid policy and implemented sporadic lockdowns, the packaged food industry still attracted investment. Multinational cheese maker Bel snapped up 70% of Chinese cheesemaker Shandong Junjun Cheese Co. Bubs Australia entered into a venture for infant-formula production in China, while Thai Union Group set out plans to invest in China’s pet food market. Major south-east Asian dairy group Vinamilk invested in its domestic production in part to help support exports to China.

Research by GlobalData suggests there was a dip in deal-making in China last year, but some observers believe that the country’s packaged food sector may be headed into a period of consolidation, as the shift away from Zero-Covid could cause issues along the supply chain and upend consumer demand patterns. In general, the overall situation may benefit the larger players who have better funding to weather a disjointed consumer market over the next one to two quarters and with a better distribution ability.

In the meantime, the green food sector in China also experienced significant growth. Green food is defined as food that is sourced from high-quality environments and produced using specific techniques with strict production quality process control, rendering these products safe for human consumption. 

For example, innovations in technology have sparked a plant-based food renaissance. In China, the plant-based meat industry is projected to be a $13 billion industry in 2023. And with long-term plans to reduce meat consumption by 50% this year, China is becoming a key target for businesses looking to expand or enter the plant-based food industry.

Studies have shown that transitioning to a plant-based diet can reduce carbon footprint by up to 73%. Moreover, China’s growing middle class have the expendable income to make more health-conscious purchasing decisions.

What policies and regulations should brands be aware of?

In the past decade, Chinese consumers have been increasingly focusing on the safety and quality of food products, especially after a few highly publicised cases of adulterated products. Since 1 March 2023, the only regulation in China that specifically addresses the general requirements for manufacturing and selling food-related products (including food-contact materials and articles) has come into effect.

China’s State Administration for Market Regulation (SAMR) released the Interim Measures for the Supervision and Administration of the Quality and Safety of Food-Related Products (“Interim Measures”) developed from a draft version that was published on 31 July 2020 for comment. Compared with the overarching Food Safety Law (FSL), the Interim Measures refine some requirements targeted at food-related products but are not significantly different from the existing laws and regulations or current practice. 

Although the Chinese government has developed more stringent regulatory measures, serious incidents have been recorded in the past, including unsanitary conditions in factories and contamination of food products by pathogenic microorganisms, pesticides and heavy metals. The most famous case was contaminated baby formula, which resulted in the death of six infants and over 50,000 hospitalisations.

For this reason, the Interim Measures list a series of prohibited food-related products, such as products that use raw materials and additives not conforming to food safety standards, as well as other substances that may endanger human health or use additives beyond the scope or limitation.

The list includes products that have been ordered by the government to be prohibited/phased out from the market, products that forge the origin or forge or falsely use another’s factory name, address, etc. and any other products that do not conform to laws, regulations and food safety standards.

In recent years, China has also tightened its management of plastic pollution and has banned the production of certain plastic items, such as ultra-thin plastic shopping bags with a thickness of less than 0.025 mm. Industry players will need to pay closer attention to the development of industrial policies that will affect the supply of food-contact plastic products, since more restrictive policies are expected in the future.

Basic quality control requirements in the whole production process of food-related products are included as well. These requirements are principles and do not exceed what is expected for production quality management of food-related products. 

Food products must have “identification information” (e.g., name, production date, shelf life, type, category, precautions and warnings) which does not necessarily refer to “labelling” information. In this respect, the Chinese GB (“Guo Biao”, Chinese for “National Standard”) food packaging standards are more specific. For example, GB 4806.1-2016, the General Safety Standard, regards the information on the label, the instruction manual, or the declaration of compliance all as product identification information, and therefore allows the identification information to be provided on the label, in the instruction manual, or in accompanying documentation. Fines will be imposed on food manufacturers and operators who violate these rules.

Companies must obtain a Food Production License to engage in food production in China. The General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) is responsible for the nationwide administration of food production licensing, while local Quality and Technical Supervision Bureaus (QTSBs) are responsible for administrating the scheme within their respective administrative regions. 

In terms of requirements, the enterprise must possess the means for processing the specified type and volume of food products and must maintain the cleanliness of facilities. All staff involved in food service must undergo China Food and Drug Administration (CFDA)-approved safety training, and a system must be in place for ensuring food product safety, including the prevention of cross-contamination. These requirements also apply to Food Distribution and Catering Licenses.

Applicants for a Food Production License should additionally set up a health inspection and inspection records system or other health management systems for their personnel, establish a goods purchasing and pre-delivery inspection records system, and other food safety management systems for basic food ingredient inspections and manufacturing processes. 

Site inspection by two to four inspectors will be conducted at the food production venue, and a product sample inspection will be required. Food Production Licenses are valid for three years, and applications for renewal should be submitted six months prior to expiry.

China Consumer 2023

This article was produced as part of a series for China Consumer 2023.

Learn more about CBBC’s flagship consumer event of 2023 here.

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China has been the world’s largest beer market since 2002. The country’s beer industry is also the fastest growing in the world, with total revenue projected to reach US$131.5 billion (£106.7 billion) by the end of 2023. However, the market is facing some challenges, such as the overcapacity of mass beer production and decreasing domestic beer consumption. That said, the value of beer sales in the country continues to grow thanks to rising demand for premium and flavoured beers, which foreign brands dominate.

Market consolidation and key players

China’s beer market is highly consolidated. The five top businesses — CR Snow, Tsingtao Brewery, Anheuser-Busch InBev, Yanjing Beer and Carlsberg — account for the bulk of sales volume and continue to hold a reasonably consistent share of the market. The industry is dominated by domestic companies (with a couple of exceptions for foreign brands who had an early entry in the market) making it challenging for international brands to join and take market share away from well-established competitors.

In 2021, the combined market share of the top five brands reached more than 70%. Small and medium-sized brands carve up the remaining market share. Among the key players, CR Snow holds the largest market share (23.2%), followed by Tsingtao Brewery (16.4%), Budweiser Asia Pacific (16.2%), Yanjing Beer (8.5%), and Carlsberg (6.1%).

Domestic Chinese beer brands benefit from superior base markets, geographically distinct branding and better local consumer loyalty. For example, CR Beer Snow clearly outsells its competition in Sichuan, the northeast and eastern China, while Tsingtao Beer is the preferred choice in its home province of Shandong. Successful foreign brands have had to rely on international endorsements and effective marketing.

Budweiser and Carlsberg have both built a solid brand reputation and loyal consumer base by engaging in activities such as the promotion of important music festivals in China. In addition, the two brands gained an edge by entering the market between 2010 and 2012 — that is, significantly earlier than domestic companies that only started debuting a series of high-end beers in 2015. This is mainly because the Chinese beer industry has been progressively shifting towards a higher-end segmentation.

Major trends in China’s beer market

A taste for craft beer
In recent years, the sales of high-end products have increased significantly. The implementation of this “high-end strategy” and improvement of product quality will likely become the new ground for competition between beer companies. Craft beer production, for example, began in China in the late 2000s against a backdrop of increased competition and shifting customer tastes. As regional brewers experimented with making their own beer, microbreweries sprang up across the country — something that won’t be a surprise to anyone who has visited one of the many, many craft breweries in cities like Beijing and Shanghai. Rapid urbanisation also brought about a shift in lifestyle, particularly among the younger population, and made it possible for people to purchase speciality beers. By 2025, it is predicted that 50% of all beer drunk in China and 72% of all beer spending will occur outside the house, such as at bars and restaurants. Additionally, Chinese consumers have started to choose premium beer over mass-produced, less expensive options.

E-commerce as a key distribution channel
During Covid-19, businesses had to rely more on e-commerce for product distribution due to the unpredictability of lockdowns and social distancing measures. On the Tmall platform, beer sales income and volume rose by 48.2% and 42.5% year-on-year in 2020, respectively, while the average online price of beer climbed by 4% over the same period.

Flourishing themed bars
Beer-themed pubs and bars have been flourishing across China. The total revenue of the domestic pub industry rose at a compound annual growth rate (CAGR) of 8.7% between 2015 and 2019 and is expected to reach 18.8% by 2025. Although the number of bars continues to increase, the penetration rate and concentration are still low, indicating that the entry threshold of the industry is low, which will lead to fierce market competition. By creating a good atmosphere for consumers and providing high-quality and relatively affordable beers, pubs can further attract the interest of consumers and enhance the competitiveness of their own brands.

Sustainability and carbon neutrality
As new and cleaner technologies have continued to emerge and even subvert the entire industry in recent years, more and more consumer brands are attempting to achieve carbon neutrality. By optimising packaging and increasing the use of renewable energy in production, they convey the brand’s commitment to sustainable development to consumers. From the perspective of beer products, optimising packaging is the first step to promoting recycling, which requires the active participation of production enterprises.

Challenges and opportunities for British beer brands

By 2026, the China beer market is expected to reach US$151 billion (£122.8 billion), growing at a CAGR of 5.07%. The industry is likely to continue its growth as a result of factors like increasing barley imports, China’s cheap average retail price (ARP) for beer, rising beer consumption among millennials, and fast-paced urbanisation. However, the long-term health concerns of excessive beer drinking, the damaging effects of beer manufacturing on the environment, and strict government controls are possible challenges that the market may have to face during future expansion.

Nevertheless, some noteworthy positive trends will emerge, including growing consumer preferences for craft beers, a boom in online beer sales, a growing taste for premium beers and an increase in the consumption of non-alcoholic beers. Moreover, the return to pre-pandemic levels of travel and international exchange is likely to stimulate a growing appetite for imported goods, which has already emerged in a growing preference for imported beers in China.

Chinese customers are eager to treat themselves to pricier international beer brands over local ones, in their perceived choice of quality over quantity. As such, premium beer consumption will continue to grow in popularity, contributing to the expansion of the beer industry. Precisely due to this increased propensity of young consumers toward premiumisation, foreign brands are advised to focus more on the mid market and premium segments.

Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC’s market research services can help you build knowledge and understanding of the Chinese market prior to investment.

A version of this article was first published as ‘China’s Beer Market: Outlook and Opportunities’ by Dezan Shira & Associates’ China Briefing.

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A crisis in food confidence began in China in 2008, when melamine was found in locally produced baby formula, sickening over 300,000 infants, and causing the death of three. Since then, many other food safety scandals have been recorded in the country.

More recently, a “double standards” scandal erupted when it was found that the soy sauce sold by food company Haitian outside of China had fewer additives and preservatives than its domestic counterpart.

In response to these scandals, in July 2022, the National Health Commission (NHC) announced the issuance of 36 new National Food Safety Standards and three revised National Food Safety Standards. This is the first batch of national food safety standards issued by the NHC since September 2021.

Food advertising has also been impacted by these new regulatory measures, with authorities coming down particularly harshly on campaigns and ads endorsing products that claim therapeutic effects. Heavy fines have been issued against food companies that claimed false information on their labels or called their products “organic” without obtaining the proper authorisation from the Certification and Accreditation Administration (CAA). Therefore companies marketing food products in China should avoid any misleading or false content in their campaigns.

According to Chinese Advertising and Consumer Laws, an advertisement is deemed false if it deceives or misleads consumers with incorrect or confusing content, such as if the product does not exist, the information is inconsistent with reality, if scientific or statistical information is false or cannot be verified, or any other circumstances in which the consumers are deceived or misled by false content.

The penalty for campaigns deemed false could be valued at three-to-five times the advertising fees, or, if the advertising fees cannot be calculated or are significantly low, a fine of RMB 200,000 (£23,787) to RMB 1 million (£119,000). If illegal activities have been committed more than three times within two years or there are other serious circumstances, the advertiser may incur a fine of five-to-ten times the advertising fees, or a fine of RMB 1-2 million, and the business licenses may be revoked.

National symbols are taken seriously in China and cannot be used in advertising of food products. The law states that an advertisement may not use any form of the national flag, the national anthem or the national emblem, or the army flag, anthem, or emblem; or use the names or images of state organs or their functionaries. For example, a coffee brand was fined for using the phrase “Same as the Prime Minister’s Coffee” and hanging the photo of a state leader at its stores.

The use of minors under the age of ten as advertisement endorsers is also prohibited in China. In 2018, a2 Milk engaged Chinese actress Hu Ke and her son, who was younger than ten at that time, as endorsers for their milk powder on their official website and social media accounts. As a result, the company was fined RMB 100,000 (around £11,900) by the Shanghai Administration for Market Regulation (AMR).

Another important rule to follow is not to claim disease prevention or therapeutic effects of food products. In May 2022, actress Jing Tian claimed, as an endorser of a fruit and vegetable pressed candy, that the candy could prevent the absorption of sugar, oil and fat in the body. As a result, she was fined RMB 7.22 million (almost £860,000) and banned from being an endorser for three years. The manufacturer of the candy was also penalised, and its products were removed from major e-commerce platforms.

Regular food advertisements are not permitted to claim therapeutic effects or use medical language or language that easily causes confusion between the products promoted and pharmaceuticals or medical devices.

Manufacturers of baby formula and other milk products are not allowed to claim full or partial substitution for breast milk. In 2022, Yashili published advertisements claiming that its products are “the most like breast milk” and purchased search engine optimisation services to list its product at the top of search results. Yashili was fined RMB 200,000 (£23,800) by the Huangpu Branch of the Guangzhou AMR.

Healthcare food or food formulated for special medical purposes must have official approval before appearing in published advertisements. In 2020, Abbott published a short video for its product PediaSure, which is formulated for special medical purposes, before obtaining approval, and was fined RMB 1.94 million.

Advertisements for healthcare food, medicine, medical treatment, or medical devices are also not allowed to use endorsers to make endorsements or testimonials.

More and more multinational corporations in the food industry from the United States and Europe are increasing their stake in China, as they believe in the massive market potential of the country. However, these companies should make sure that they are well-informed of the possible risks regarding false or misleading advertising and the relevant legislation regulating the sector.

Entering China is a key decision for businesses of all sizes. Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC can provide you with the platform to unlock your potential.

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